Milk has been one of the most serious battle grounds in the supermarket price war. Last week Morrisons cut the price of four pints of semi-skimmed milk to 89p – a price that’s matched by Asda, Aldi and Iceland. The idea is that people will be drawn into stores by cut-price essentials, and will stay to do a full shop. But a new study suggests that the race to the bottom for milk prices could be a damaging mistake.
Retail Analysts at Mintel asked shoppers how much they would be prepared to pay for four pints of milk. Of the 85% of people who drink milk, more than half of them (51%) said they’d be prepared to pay more than £1. This is the price at which Waitrose, Tesco and Sainsbury’s sell their milk.
However, many people were prepared to pay far more, to ensure that dairy farmers got a decent deal. On average they said they would be happy to pay £1.28 for four pints – far more than any of the major supermarkets charge.
The problem for the supermarkets is that while 51% of people say that theoretically they’d be prepared to pay more, in reality while some supermarkets are keeping prices low, the others need to compete in order to protect their market share. In addition, although 51% would be prepared to pay more, it still leaves a significant chunk of the market who will vote with their feet if supermarkets put the price of milk up.
Impact of lower prices
Dairy farmers have been saying for months that this price war is incredibly damaging to their livelihoods. It’s hardly surprising given that each pint of milk costs a farmer roughly 30p to produce, and recent EU figures revealed they are getting an average of 25p for it.
Their situation is getting worse too, because at the end of March, the axing of EU milk quotas means many countries increased production, so that dairy farmers have to compete with cheap overseas imports too.
In January this year, the Environment, Food and Rural Affairs Committee said that already farmers were being forced out of business every week. By that stage, NFU figures show that the number of dairy farmers had halved since 2001, and had fallen below 10,000 for the first time.
With thousands of farmers going under, others have had to look into a huge range of side businesses in order to boost profits and stay afloat. It’s why we now have a West Dorset farmer who produces milk vodka on the side, a Leicester farmer who specialises in glamping in the fields next to her cows, and even a farmer in Tunbridge Wells who converted a cowshed into a curling rink.
It begs the question of how long they will bother with the farming side of the business, and at what point we become a country packed with campsites and children’s farms – but entirely devoid of dairy herds.
But what do you think? Would you be prepared to pay more for your milk to help keep dairy farmers in business, or are bargains too important to your household budget? Let us know in the comments.
Source: AOL